Post on 12-Aug-2015
OVER
Suppose New
Competitor enter your
market, But
How do I React???
Ignore it!!Introduce
free product
of my own!!
Based on
Article,
“Competin
g Against
Free”
June 2011 Edition
David J Bryce Nile W HatchJeffry H Dyer
About the Research
5 Year Study
34 incumbents
26 Markets
About 2/3rd of incumbents failed,
1. Ignore
2. Launch Free to early
3. Launch Free too Late
Accessing the threat
Accessing the threat
Seriousness hinges on three factorsEntrant Ability to
Cover its costs quickly
Growth rate of Entrants Users
Defecting rate of your paying customers
Choosin
g whether
& when
to respond
Business Model
Threat
Change business model
quickly
Delayed Threat
Can Co-exist for few
years
Trick is to figure out
when to respond
Why Microsoft should take its competition more seriously?
Immediate Threat
Your problem, so quickly figure out to launch free offering
Minor Threat
Continue to Monitor
Situation
Established Free offering as Threat.
Considered Timing
Offer a better FREE
How to Respond???
Four Tried & True Strategies
i. Up Sell
ii. Cross sell
iii. Charge 3rd Parties
iv. Bundle
1. Up SellIntroduce free basic offering for
widespread use, charge for premium.
Very large user
base.
High % users
want Premium
2. Cross SellSell other products that are
not directly tied to free products
Broad Product
Line
Strong
Partnerships
3. Charge 3rd PartiesProvides a free product to users
and charge 3rd Parties for access of them
Large user base segmented
for third parties(Advertisers &
Target Group)
4. BundleOffer a free product or service
with paid offerings.
Products that can be bundled
with
free offerings.
Product that needs regular maintenance & complimentary offering.
Challenges of
Launching Free
• Must separate revenue from cost
• Different manages over each
• Take profit responsibility to top
P & L Structur
e
• Must think of marginal not average costs
• Must understand long term cost of losing market share
• Beat back while you can
Cost Accounti
ng System
Challenges of Launching FreeChoosing whether & when to
respond
Offer a better FREEAccessing the threat
Introduction
These slides were created by Shashank Motepalli, as part of an internship done under the guidance of Prof. Sameer Mathur (www.IIMInternship.com)
Prof. Sameer Mathur
Marketing Professor 2013 –-----------------------------------------------------------
Marketing Professor 2009-2013-----------------------------------------------------------
M.S(Marketing) and PhD 2003-2009
Shashank Motepalli
Summer Intern 2015(May-June)--------------------------------------------------------------iMtech(IT) First Year
www.IIMInternship.com